Smith v. Medical Benefit Administrators Group, Inc.
639 F.3d 277
| 7th Cir. | 2011Background
- Smith sued Auxiant (health plan claims administrator) in ERISA for breach of fiduciary duty based on preauthorization decisions that were allegedly not accompanied by proper coverage analysis.
- Auxiant preauthorized Smith’s gastric bypass surgery in September 2006 and Smith underwent the procedure in October 2006.
- Auxiant later denied payment for the surgery as excluded under the plan, after Smith exhausted internal appeals.
- Smith alleges Auxiant delayed responses, preauthorized after cursory review, and misled insureds about coverage, causing financial harm.
- District court dismissed the complaint as seeking impermissible extracontractual or monetary relief under ERISA; Seventh Circuit reviews de novo.
- Court remands for further proceedings, recognizing potential for declaratory and injunctive relief if consistent with ERISA, while noting factual development could alter views.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Smith states a plausible ERISA fiduciary breach claim | Smith breaches fiduciary duties through misrepresentation/delay in preauthorization | Auxiant complied with plan terms; no fiduciary breach proven | Plausible claim of fiduciary breach against Auxiant |
| Whether ERISA 502(a)(1) provides relief here | Smith seeks plan benefits due under the plan | Plan excludes gastric bypass; no benefits owed | No relief under 502(a)(1) |
| Whether ERISA 502(a)(2) provides relief for individual injuries | Relief for personal losses due to fiduciary breach | Relief would inure to plan; not individual injury | No viable 502(a)(2) relief for individual injuries |
| Whether 502(a)(3) permits declaratory/injunctive relief for fiduciary breaches | Seeks declaratory/injunctive relief to curtail improper preauthorization practices | Relief limited to injunctive/appropriate equitable relief under ERISA | Declaration/injunction potentially available; district court must consider appropriate equitable relief consistent with ERISA |
Key Cases Cited
- Kenseth v. Dean Health Plan, Inc., 610 F.3d 452 (7th Cir. 2010) (fiduciary duties; the scope of duties and remedies under ERISA)
- Mondry v. Am. Family Mut. Ins. Co., 557 F.3d 781 (7th Cir. 2009) (fiduciary duty; duty of loyalty and care; communication obligations)
- Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134 (1985) (extracontractual relief under 502(a)(2) not available for individual injuries)
- LaRue v. DeWolff, Boberg & Assocs., 552 U.S. 248 (2008) (asset-focused context; distinguishes defined contribution plans from health plans)
- Mertens v. Hewitt Assocs., 508 U.S. 248 (1993) (equitable vs. legal relief under ERISA; limits on 502(a)(3) remedies)
- Steinman v. Hicks, 352 F.3d 1101 (7th Cir. 2003) (recognizes 502(a)(3) as a vehicle for individual equitable relief)
- Donovan v. Cunningham, 716 F.2d 1455 (5th Cir. 1983) (role of equitable relief in fiduciary breach context)